Finally there is a hope for computer and software patent owners in the US

August 2016 | SPECIAL REPORT: TECHNOLOGY RISK MANAGEMENT

Financier Worldwide Magazine

August 2016 Issue

Software patents are not completely dead but they are on life support, and computer related patents may not be in much better shape. That is how computer and software patent owners in the United States felt after the US Supreme Court decision in Alice Corp. in 2014. Alice Corp. Pty. Ltd. vs. CLS Bank Int’l, 573 US, 124 S. Ct., 2347 (2014).

The US patent system, once regarded as progressive by finding various subject matters patentable, has changed over the years and begun taking a narrow view of patent eligibility. The US Supreme Court In Alice Corp. relied on the two-part analysis that was enunciated in its presidential opinion to determine patent eligibility and held a system, a method, and software directed a computer-implemented, electronic escrow service for facilitating financial transactions were drawn to abstract ideas ineligible for patent protection.

The first part of the two-part analysis requires that we determine whether the claims at issue are directed to one of those patent-ineligible concepts, such as laws of nature, natural phenomena and abstract ideas. And if the first prong is met, then the second part of the analysis requires that we consider the elements of each claim both individually and as an ordered combination to determine whether the additional elements transform the nature of the claim into a patent-eligible application. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 US. (2012). The court in Alice Corp. did not define “abstract ideas”.

Since the Alice Corp. decision, lower courts have been faced with challenges to determine if claims directed to software, computer related invention are drawn to an abstract idea. A method of generating a device profile for use in a digital image processing system was found to be directed to an abstract idea without any additional elements that could amount to more than the abstract idea itself and held ineligible. Digitech Image Tech., LLC v. Electronics for Imaging, Inc., 758 F.3d 1344 (Fed. Cir. 2014). A method for conducting reliable transactions in an e-commerce environment was also found ineligible because it was directed to an abstract idea and did not amount to much more than that. buySAFE, Inc. v. Google, Inc., 765 F.3d 1350 (Fed. Cir. 2014).

A method for distribution of products over the internet was found ineligible as being directed to an abstract idea and there was nothing that added significantly more. Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014). From the case law, it appeared that once a claim was held to be directed to an abstract idea, additional elements that transform such a claim into a patent-eligible application were rarely found and the claims were held patent ineligible. And many of the claims directed to computer and software inventions were held ineligible by the Court of Appeals for the Federal Circuit (Federal Circuit), which has the exclusive jurisdictions for all patent appeals, since the Alice decision. While the Court found claims eligible in some cases, it was not so common, unfortunately for patentees of computer and software inventions.

InEnfish, LLC v. Microsoft Corp, the Federal Circuit found a software patent claim eligible, giving some hope to computer and software inventors.Enfish, LLC v. Microsoft Corp, 2015-1244 (Fed. Cir. 2016). In Enfish, claims were directed to a data storage and retrieval system for a computer memory with a “self-referential” table in contrast to a “relational table” used in the prior art. The court, applying the two-part test, concluded that the claims are not directed to an abstract idea and, therefore, are patent eligible.

Accordingto the Federal Circuit,when determining what constitutes an abstract idea, it is appropriate to compare the claim at issue to claims already found to be directed to an abstract idea in previous cases. Also, the Federal Circuit noted that the “directed to” inquiry cannot simply ask whether the claims involve a patent-ineligible subject concept because essentially every patent eligible claim involves such a concept to some degree. Rather, the inquiry should apply a filter to claims, considered in light of the specification, based on whether their character as a whole is directed to patent ineligible subject matter. Then the court stated that the Supreme Court ruling in Alice does not hold that all improvements in computer-related technology are inherently abstract, and we should ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.

The Federal Circuit summarised the first step of the two-part test in this case and asked whether the focus of the claims is on the specific asserted improvement in computer capabilities or on a process that qualifies as an abstract idea for which computers are invoked merely as a tool. The court reasoned that the claims at issue in Enfish are directed to a specific improvement to the way computers operate, embodied in the self-referential table and not directed to an abstract idea, and the plain focus of the claims is on an improvement to computer functionality and not on economic or other tasks for which a computer is used in its ordinary capacity. Unlike the claims that were found patent ineligible in previous cases, the claims in this case are directed to a specific improvement to computer functionality. In the court’s view, therefore, whether or not a claim is directed to a specific improvement to computer functionality is important in the determination of patent eligibility.

Another case decided by the Federal Circuit sheds more light on this determination. In TLI Communications LLC v. A. V. Automotive, L.L.C., which was decided on 17 May 2006, the Federal Circuit held that software-implemented data structure or its method of creation are directed to an abstract idea and are not patent eligible. So what was different from the claims in Enfish? In TLI, the claims recite a method or an apparatus for recording and administering digital images. To be more precise, the claims were drawn to the concept of classifying an image and storing the image based on its classification. While the claims require concrete, tangible components, such as a telephone unit, the specification of the patent made it clear that the components merely provide a generic environment.

The Federal Circuit asked whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea, and the court differentiated claims that are directed to the functioning of a computer from claims that simply add conventional computer components to well-known business practices or recite use of an abstract mathematical formula on any general purpose computer. After examining the specification, the Federal Circuit did not find descriptions of a new telephone, a new server or a new physical combination of the two. Instead, the server was described simply in terms of performing generic computer functions such as storing, receiving and extracting data. The court ruled that such claims are directed to an abstract idea and are patent ineligible.

From decisions of Enfish and TLI, computer and software patent claims survive the two-part test if the claims are directed to specific improvements in computer-related technology or computer functionality, and the specification contains sufficient descriptions of the improvements that are made by the claimed subject matter, the claims may be held patent eligible. Therefore, those who are trying to secure US patent protection for computer and software invention should draft claims with ‘specific improvements’ by the invention in mind, as such claims have a better chance of surviving patent eligibility scrutiny.

Naoki Yoshida is a partner atFinnegan, Henderson, Farabow, Garrett & Dunner, LLP. He can be contacted on +813 3431 6943 or by email: naoki.yoshida@finnegan.com.